Leveraging the SDGs with Responsible Investors

The UN Sustainable Development Goals (SDGs) have been able to catch responsible investors’ attention all around the globe since they were adopted in September 2015. One year down the road, a coalition of investors, including the managers of more than €550bn in Dutch pension assets, publicly committed to integrate SDGs within their investment strategy. Although the coalition is a Dutch and Swedish affair for now, the intention and hope is that other institutional investors will come on board.

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RobecoSAM and PGGM are two other examples of institutional asset managers which use SDGs as an investment framework to capture corporate long-term value creation. In addition, Arabesque, a spin-off of Barclays Bank, puts sustainability factors at the heart of its investment strategy, integrating them within its fundamental analysis. It considers SDGs as an investment opportunity which can avoid financial risks and enhance shareholder value.

Finding the sweet spot between business and societal impact

Impact investors are looking for companies that “Walk the Talk” on SDGs and truly integrate the most material ones within their business strategy, as it will enhance the stock price as well as have a positive social and environmental impact. Plenty of companies have not reached this stage yet, and fall within the “Talk the Talk” type of companies where SDGs are seen as a simple external communication tool, making investors’ lives harder.

We have mapped each of the GICS Industry Groups with its most financially material and strategic SDGs (refer to download above). For each industry group, we identified the most financially material SDGs where companies operating in the relative industry sector could have an impact on. The natural connection between business and the SDGs that are related to industrial activities themes such as Economic Growth (#8), Infrastructure and Industrialization (#9) and Climate Change (#13) are easy to be made. Other themes like Education (#4) and Peace and Justice (#16) are not so obviously attached to corporate activities. Depending on the character and culture of your company, looking for the issues where you can make a real impact will be loved by both society and shareholders.

Examples from pharma and household products companies

SDG 3 - Good Health and Wellbeing is one of the SDGs with a clear connection to the pharmaceutical sector with an immense contribution potential. By doing so, pharmaceutical companies could preserve their brand image, reputation, as well as gain new business opportunities as entrance into new markets, expansion of consumer base, and anticipation of long-term financial gains. GlaxoSmithKline is an example of a pharmaceutical company which has been able to incorporate within its business strategy the SDG 3.8 – achieving access to safe, effective, quality and affordable essential medicines and vaccines for all. In fact, GSK has been ranked by the Dutch independent initiative Access to Medicine Index as the best research-based pharmaceutical company for its effort to improve access to medicine in 107 low- and middle income countries.

Thanks to its equitable pricing strategies as intellectual property leniency in poor nations and lowering drug price by realizing the patent, GSK has been able to act upon one of the most pressing health issues as well as build goodwill and a strong market presence. Partnerships have been crucial for GSK's success. Scalability has been made possible by partnering with academic institutions across Africa, local governments and entities and other peers as Johnson & Johnson (SDG 17); it helped GSK leverage its R&D capabilities, ensure access to successful products and support access to markets.

By establishing a scalable access-to-medicine strategy with a large impact to address high-priority needs, GSK strategically develops and drives business in developing countries which now account for approximately 25% of its total sales, gaining new market shares and a large consumer base or as the CEO Andrew Witty calls “the other 6 billion” people.

SDG 6 Clean Water and Sanitation fits naturally to the Unilever brands Lifebuoy, Domestos, Pureit, Qinyuan and Signal. In its Sustainable Living Plan the company aims at improving the hand-washing habits of 1 billion people, reducing the incidence of child deaths by 44%, and enhancing sales in India and Pakistan, two countries with the highest rates of diarrhoea-related child deaths. In order to scale the impact and deliver the message, partnerships with local entities and governments are crucial as they have the local knowledge and expertise.

As reported in the Unilever 2015 Annual Report, “Sustainable Living” brands which defines products with positive social and environmental purposes at the heart, are growing 30% faster than the conventional ones, indicating the double dimension benefit – business and societal.

GSK & Unilever are two bright examples of how companies successfully create positive societal impact and generate a healthy profit. Exactly what is sought after by responsible investors: strategic inclusivity of business and scalability of the positive impact.

Want to start create an impact today?

At Finch & Beak, we believe that the rapidly shifting society is spurring companies to adjust existing business in order to secure their future success. Finch & Beak recently developed a 5-week readiness assessment tool which helps you in mapping the sustainable development on your business priorities. If you are looking for practical guidance on how to conduct the SDGs readiness assessment, call Josée van der Hoek today at +31 6 28 02 18 80 or send her an email at josee@finchandbeak.com.